April 25, 2013 / 3:50 PM / in 5 years

FOREX-Dollar gains vs euro as data allays economic concerns

* Euro hurt by ECB rate cut expectations
    * Dollar gains after U.S. jobless claims data
    * Sterling jumps to two-month high vs dollar on UK GDP data
    * Japan investors sellers of foreign bonds in latest week

    By Julie Haviv
    NEW YORK, April 25 (Reuters) - The dollar rose against the
euro on Thursday as data indicating resilience in the U.S. labor
market allayed concerns about the pace of the economic recovery,
with many analysts expecting the greenback to continue to gain.
    With the state of the labor market a key factor for U.S.
Federal Reserve policy, the dollar gained after data showed the
number of Americans filing new claims for unemployment benefits
fell last week. 
    The data offered reassurance that the bottom is not falling
out of the labor market despite signs of slower growth.
    It also appeared to offset recent signals that economic
activity softened in March and early April, a phenomenon that
economists have dubbed the spring swoon because it has happened
the past two years.
    Orders for durable goods marked their biggest drop in seven
months in March, and despite the fall in the latest weekly
jobless claims, the U.S. labor market is still sluggish and
retail sales have been weak, which could keep the Federal
Reserve's ultra-loose policy firmly in place. 
    The Federal Reserve will likely discuss the string of weak
data at its policy meeting next week. 
    Expectations that the European Central Bank may opt to cut
interest rates has kept the euro under pressure. Senior sources
involved in the deliberations have told Reuters that momentum is
building for monetary action to help the recession-hit euro
    The euro last traded at $1.3008, down 0.1 percent on
the day, not far from a low of $1.2954 struck a day earlier
after a German survey of business morale came in weaker than
    Signs that two months of political gridlock in Italy may be
coming to an end were seen as positive for the euro, but not
enough to offset the impact of an ECB interest rate cut.
    "Part of the euro decline is technical and cross rate
related, with the inability for it to hold above $1.31 and also
a little spillover from euro/sterling price action," said Omer
Esiner, chief market analyst at Commonwealth Foreign Exchange in
Washington D.C.  
    "There is not much of an appetite to buy the euro above
$1.31 and recent German data has raised expectations of an ECB
rate cut at its next meeting, so there is limited upside for the
euro," he said. 
    Investors also remain wary of the U.S. economic recovery,
with gross domestic product data on Friday likely to garner a
lot of attention.
    "Investors have recently grown skittish about the U.S.
economy losing steam following a run of soft data on the
consumer and manufacturing," said Joe Manimbo, senior market
analyst at Western Union Business Solutions in Washington D.C.  
    "All eyes now look ahead to Friday's first-quarter growth
figures," he said.
    Gross domestic product data on Friday is expected to show
the U.S. economy grew at a 3.0 percent annual pace in the first
quarter, accelerating from a 0.4 percent rate in the previous
period, though economists predict that has slowed to around 1.5
percent in the current quarter. 
    A better-than-expected performance by the British economy
saw the pound jump more than 1 percent to a two-month high
against the dollar. Sterling also hit a three-week peak
versus the euro. 
    Britain avoided recession in the first quarter,
wrong-footing some bearish investors, including longer-term
ones, who had expected a weak number that would push sterling
lower. The data watered down expectations that the Bank of
England will add to its asset-buying program to underpin the
    Sterling rose 1.1 percent to $1.5458. The euro
 fell 1.1 percent to 0.8424 pence.
    While worries about the British economy have eased somewhat,
persistent concerns over a sustained U.S. recovery have thwarted
the dollar's rise past 100 yen - last seen in April 2009 - with
options barriers also standing in the way.
    The dollar last traded at 99.48 yen, flat on the day,
according to Reuters data.
    Data on Thursday from Japan's Ministry of Finance on weekly
capital flows showed that Japanese investors remained net
sellers of foreign bonds, unloading a net 862.6 billion yen in
the week to April 20.  
    Investors have been closely watching flow data in recent
weeks for any indication that the Bank of Japan's massive
stimulus has pushed Japanese investors to seek higher returns
overseas. Major Japanese life insurers have expressed caution
about shifting funds into foreign bonds.
    But over a period of time, investment from large Japanese
investors is likely to pick up and some of that could spill over
into Europe and that could usher more yen weakness.
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